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Computer industry

IBM Launches Low-Cost Mainframes in Bid to Boost Revenue

Strategic Insights

— 1 min read

IBM is introducing its first low-cost, microprocessor-based mainframe computers, a move aimed at revitalizing its core business and offsetting declining revenue. The new machines will feature parallel processing architecture, targeting transactions and large data base queries. This move comes at a critical time for IBM, as the company struggles to regain consistent profit and revenue growth.

Key Takeaways:

  • IBM will launch two mainframe servers, one for transactions and another for large data base queries, both designed with parallel processing architecture.
  • The new machines will compete directly with other computer systems, including UNIX-based workstations and query servers developed by Teradata, a unit of American Telephone and Telegraph Co.
  • The rollout includes five new models of the AS/9000 mainframes and aggressive moves in software pricing, with changes expected in the pricing structure based on usage.
  • IBM's move to lower-cost, microprocessor-based, mainframes will cut into its already declining profit margins, but analysts point to pent-up demand for IBM's systems.
  • The new machines are designed to help delay customers from converting to the client/server environment, with some analysts expecting IBM to sell out of these systems through July.

Statistics:

  • Mainframe sales have plummeted 50% since 1991, reaching about $6.6 billion in 1993.
  • IBM is anticipating another revenue decline of about 50% in mainframes this year.
  • IBM's revenue decline is attributed to the shift in computer users to lower-cost PCs or clients linked together by hardware boxes called servers.
  • In the past few years, hardware margins have plunged, and IBM has fallen behind in the trend of client/server computing.

Sources:

  • "IBM Unveils New Mainframes, Tries to Revive Revenue", The New York Times (no date mentioned)
  • Reuters News Agency (no date mentioned for the specific article)
  • IBM Annual Report 1993
  • Ad Age (no date mentioned)
  • The Wall Street Journal (no date mentioned)

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